TORONTO, June 7, 2011 /CNW/ - The head of the Investment Industry
Association of Canada (IIAC) says that market data price reductions
outlined in a letter sent out last week by the TMX Group to its market
data clients fails to respond to the issue of overly aggressive market
data pricing in Canada that was identified in a recent IIAC
commissioned study.

"The study clearly shows that Canadian marketplaces have taken advantage
of their dominance and as a result have become overly aggressive
price‐setters for market data. This is a clear reflection of their
power over the markets as providers of equity data," says Ian Russell,
President and CEO of IIAC.

Mr. Russell's comments are based on the findings of a study commissioned
last fall by IIAC. The purpose of the study was to assess Canada's
price competitiveness for market data from a global perspective. The
study, completed in January, was undertaken by Securities Litigation
Consulting Group (SLGC).

The SLCG study concludes Canadian equity marketplaces have increased
prices for equity market data through significant price increases over
an extended period, without evidence of proportionate increases in
technology costs. Further, the Toronto Stock Exchange (TSX) has
increased prices for market data despite a significant loss in traded
market share. At the same time, fragmentation of trading has led to
increasing costs of market data for Canadian market participants as the
alternative trading systems (ATSs) are charging for data.

This has resulted in market data costs that have more than doubled for
market participants since mid decade.

"Giving Canadian market participants no alternative other than to
consume overpriced data makes our marketplace inefficient and
unattractive to international investors," comments Mr. Russell. "This
not only hurts our markets, but also Canadian companies trying to
finance and our economy as a whole. At the end of the day these costs
are borne by the investing public."

At the same time, the study's international comparison of market data
revenue indicates the proportion of revenues earned from market data at
the TMX Group, as a share of total revenue, exceeds the corresponding
percentage of many other major international stock exchanges.

Upon receiving the completed SLGC study, in February IIAC met with and
outlined the findings to the TMX Group as a first step to negotiating
fee reductions for data from all the Canadian marketplaces.

On May 30, 2011, the TMX Group announced selective price reductions in
the letter to its market data clients.

"IIAC is disappointed that after discussing the findings of the study
with the TMX Group, it decided to introduce marginal market data fee
cuts to the market. While we applaud any rate cut, the cuts put forth
by the TMX Group are simply too limited in size and scope to be
responsive to the Canadian market reality for market data pricing as
outlined in the study given the 40 per cent decline in traded market
share volume of the TSX and the related loss in inherent data value,"
states Mr. Russell.

To underscore the TMX reductions lack of consistency with this market
reality, IIAC points out that the TMX Group reduced Level 1 data costs
(best bid and offered prices) from $38 to $30 per subscriber per month
in two stages, with the full reduction effective April 2012 - yet no
reductions have been made to Level 2 data (bid‐offered prices for the
full depth of order book) or TMX Venture prices. As well, Level 1 data
have been unbundled to remove Index data that will now be charged
separately. The new price for purchasers of Level 1 data, Level 2 data
and Index data is $81.50, which is only a 7.4 per cent reduction in
overall pricing - nowhere near the 40 per cent IIAC had proposed the
TMX and other marketplaces reduce data prices by to reflect Canadian
market realities (IIAC proposed reductions totaling 40 per cent ‐ 25
per cent this year, followed by further reductions of 5 per cent in
each of the next three years covering all major data packages including
Level 1 data, Level 2 data and TMX Venture data).

In response to the TMX letter to its data market clients making the
changes in pricing effective as of October 1, 2011 (subject to
regulatory review), IIAC, based on the findings of the SLGC study, will
aggressively make representation to the regulatory authorities that the
prices charged for market data must be carefully reviewed, with
increases limited to underlying costs, and not based on whatever price
the market will bear. Regulators must ensure efficiencies in the
savings‐investment process are not jeopardized by excessive pricing of
all services offered by the marketplaces.

IIAC has argued that pro‐active regulatory oversight of the pricing of
market data, and other services such as trade execution, listing and
clearing, should be a necessary condition for the existing marketplace,
and any corporate restructuring that results in further consolidation
of the stock exchanges and ATSs in Canada.

The Investment Industry Association of Canada (IIAC)
The Investment Industry Association of Canada (IIAC) is a member‐based
professional association with 189 members representing 95 per cent of
IIROC registered organizations. IIAC advances the growth and
development of the Canadian investment industry, acting as a strong,
proactive voice to represent the interests of our members and the
investing public. The following four areas of focus provide clear and
purposeful direction for our actions and initiatives: market
advancement, advocacy, profile and reputation, and member support. For
more information, please visit www.iiac.ca.